Without a shadow of doubt, markets’ attention will gravitate towards the latest inflationary update from the United States for the month of June, which would elucidate whether the Federal Reserve would maintain its restrictive stance for longer or rather pivot towards looser financial conditions, in the immediate future.
According to expectations, market consensus points to a 2nd consecutive month of rising price pressures in the world’s largest economy, primarily on expectations that US firms would pass onto the consumer the rising import costs from Trump’s tariffs.
More specifically, headline inflation is seen accelerating to 2.6% and likewise, core inflation, that excluded volatile food and energy prices, are projected to climb to 3% and mark their 3rd straight month of acceleration.
Should inflationary pressures fail to record the projected rise, we would reasonably expect to see the
greenback facing pressure and on the contrary gold making headway, since international purchases of the
precious metal will become cheaper.
On the other hand, should inflation rise above estimates, the dollar is expected to benefit, attracting inflows and conversely the bullion may face outflows, on updated projections that the Fed may stay restrictive for longer and possibly lead money markets to tone down their expectations for cuts.
Money markets project that the central bank will cut rates twice this year, once in September and another in December and drag down the policy rate by a cumulative total of 50bps, to the 3.75%-4%.
In other news, big banks officially kickstart the earnings cycle and traders will invertedly divert their attention towards the results of JP Morgan, Wells Fargo and Citigroup at the early stages of the aftermarket hours of the US session.
Technical Analysis
Gold Chart – The precious sticks close to record highs as investors brace for CPI impact
Resistance: 24875 (R1), 26300 (R2), 27700 (R3)
Support: 23200 (S1), 22000 (S2), 20900 (S3)
